During the late 70's and early 80's, as branding became essential to the styling of the time, counterfeiting operations began popping up within U.S. Borders. While there are operations still within the borders, much of the counterfeiting climate has been “outsourced” just like multi-national corporations moving their legitimate facilities. Often times counterfeiting operations actually develop from the oversees operations by legal companies. In an article by New York Times reporter Nicholas Schmidle, he speaks with an illegal shoe factory manager named Lin operating out of Putain China, one of the largest bases for counterfeit goods production. Lin describes the Putain environment where a number of legitimate companies operate, like Nike. Lin worked in these legitimate factories and then moved to the illegal sector, he says as a means to support a business until they could move into a legitimate brand manufacturing of their own.
As the corporate worry about fake products has increased the quality behind these counterfeit goods has increased dramatically. “Because of technological advancements in materials and processing techniques, many counterfeit goods have found their way to legitimate bricks-and-mortar retail stores... in developed and developing countries...” (Marcketti 2009) The operations are no longer held in low tech environments but modern well equipped facilities that often match the quality of the real production facilities.
What is emerging is a highly profitable environment that is merging itself into consumer culture in an confusing manner. It is important to understand there are two types of counterfeit products: deceptive and non-deceptive. (Grossman 2010)
Deceptive goods are “those produced and sold with the intent of deception, misrepresenting the origin, and sacrificing the efficacy and safety of the product.” (Nair 2010) Non-deceptive products are consumer goods which reach the market with the buyer knowing, or perceiving, the faux nature of the product but acceptance for a number of reasons. Therefore there are multiple markets targeted with these products all of which result in a variety of economic, societal, psychological, and environmental impacts.
[The Goods]
[Commodity Goods]
Commodity goods are counterfeit items that do not have a direct societal or health purpose. These items include counterfeit apparel, accessories, electronics, etc. “In the last fiscal year (2009), U.S. Customs and Border Protection seized more than $260 million worth of counterfeit goods. The goods included counterfeit snuggies, DVDs, brake pads, computer parts, and baby formula.” (Schmidle 2010) The proliferation of these types of goods usually calls into questions notions of creative license, and copyright violation.
Some major examples of these goods are sneakers which made up 40% of siezed goods in 2009, electronics such as the Apple products which have been released sometimes months before release dates, and a number of golf club cases.
[Drugs + Reliant Goods]
There are a number of counterfeit items though that can be considered critical to health and safety of countries and individuals. The largest worry, which will be discussed at greater length in the impact portions of the discussion, is in the realm of fake drugs. Counterfeit drugs affect all areas now, from “cosmetic” drugs to actual disease fighting antibiotics and prescriptions. Some of these drugs have even found their way into the retail marketplace in more developed countries, although the majority are sent to poor developing countries. “The global pharmaceutical markets have always suffered from a spate of counterfeit products including fake, spurious, substandard and fraudulent preparations which apart from resulting in huge economic losses to the nation, states, and corporations also severely affect the health and well being of populations.” (Nair 2010) Drugs aren't the only worry in this area though as other items such as fake fertilizers and precautionary items, like contraceptives, create new types of fears such as loss of crops, and population control.
Some specific examples were the Nigerian malarial tablet problem, the Kenyan coffee plantation problem, large amounts of Chinese condoms, as well as the baby formula scandal which appears to be an ongoing problem for China.
[Economic Impact]
Counterfeit goods are detrimental to individual businesses and corporations as they destroy the credibility of the brand name. However many of these brands are located within the Western World, while the actual production facilities have been moved to developing countries, primarily China and India. What results is a loss in economic gain, but where the corporations were planning on it in countries like the United States, while businesses grow in these developing areas of the world. Counterfeiters operate by “exploiting legal loopholes” and get away with it due to “inaction on the part of the authorities.” (Union Des Fabricants 2004) This is probably due to the increased economic prosperity that comes from these goods in these parts of the world.
However, most of the money is made by the transportation and smuggling of these goods. “Of course, like coca farmers in Bolivia and opium croppers in Afghanistan, Lin [local employees & managers] doesn't make the big money; that's for the networks running importation and distribution.” (Schmidle 2010)
Another major issue with counterfeit goods is during the purchasing procedure, taxes are not being collected through the illegal sale, meaning that individuals money isn't going towards important aspects of governance. This leads into the next topic because if the government isn't gaining from these transactions, what kind of organizations are.
[Societal Impact]
It has been shown that counterfeiting operations are directly related to organized crime rings that deal in a number of immoral and improper markets. It is often common for these trafficking syndicates to diversify with counterfeit consumer goods because of the current lack of punitive measures. By purchasing counterfeit goods these organizations are being supported and encouraged, and by not creating strict regulation, the health and welfare of global citizens is put in jeopardy. This notion also extends to terrorist networks that have been connected to revenue streams from counterfeiting operations.
Nowhere is this understood more than the growing concerns over counterfeit drugs. “Wordlwide sales of counterfeit medicines could top US $75 Billion this year [2010], a 90% rise in five years, according to an estimate published by the Center for Medicine in the Public Interest in the United States of America.” (BWHO 2010) The majority of the danger comes via online sources. Online purchasing provides an outlet for many consumers who for personal pride reasons or cost reasons move to cheaper and more private sources for purchasing. Often these sources are not legitimate though and provide medications that either lack the required medicinal levels, are over dosed, or are simply composed of fake materials. There is growing danger that some counterfeits are moving into normal retail stores. For example, in Brooklyn, NY a large discovery of “fake Trojan brand condoms, which did not have spermicide as advertised and later failed water leakage tests” (Sulzberger 2010) was set to move into the consumer market before being captured.
Lastly, the health implications of these counterfeit drugs is most dangerous in the developing world. “Developing countries are an obvious target for counterfeiters, because the cost of legitimate drugs may be beyond the reach of much of the population and legal controls are often weak...” (BWHO 2010) The most intense case of illegal drugs affecting large populations is seen in the fight against malaria in Africa. Specifically “Nigeria, which was previously hit by drug counterfeiters. In 2001, an estimated half the drugs in the country—from antiobiotics to antimalarials – were fake.” (Lewis 2009)
[Psychological Impact]
Many studies have been done to attempt to figure out what happens when consumers receive counterfeit goods, both knowingly and unknowingly. When consumers become victims of deceptive goods they are often mentally if not physically harmed by the eventual knowledge. It affects future purchasing decisions drastically by placing a distrust of the regulatory systems in their minds. However of great interest to corporations is why consumers seek counterfeits. “Consumers willingness to pay premiums for copies suggests that they value the prestige associated with the look-alike of a name brand. These premiums compensate importers for bearing the risk of confiscation.” (Grossman 2010) One can expand this argument to include the nature of consumer society where the focus is not on high quality long lasting products but style obsolescence. The counterfeits allow the brand name style for the consumer without spending a great deal of money on an item that doesn't need to be high quality. Quality becomes a component of style, not necessarily a function of the longevity of the item.
[Environmental Impact]
While there are limited direct relationships between the physical environment's detriment and counterfeiting, the majority of the worry comes from the resources and moneys that are flowing through the counterfeit markets. The loss of taxes through legitimate sales prevents much needed funding for environmental concerns. The extreme globalization that occurs with counterfeiting is unsustainable by all the transportation required, especially since often multiple superfluous routes are utilized as a masking device for the original origin of the product.
The direct impact on the environment stems mostly from the places of creation where “employees” are often exposed to industrial practice without any type of unionized protection. It is hard to blame counterfeiting operations for the problem alone as many legitimate companies are exposing the environment to levels of pollutants not allowed domestically. However these operations significantly add to the problem and exist without any sort of regulatory rule set.
“Companies that produce counterfeit goods have been linked to terrorism, the international drug trade, sweatshop conditions and child labour in both domestic and international settings.” (IACC 2009)
[COUNTERFEITING]
[The Counterfeiting Environment]
During the late 70's and early 80's, as branding became essential to the styling of the time, counterfeiting operations began popping up within U.S. Borders. While there are operations still within the borders, much of the counterfeiting climate has been “outsourced” just like multi-national corporations moving their legitimate facilities. Often times counterfeiting operations actually develop from the oversees operations by legal companies. In an article by New York Times reporter Nicholas Schmidle, he speaks with an illegal shoe factory manager named Lin operating out of Putain China, one of the largest bases for counterfeit goods production. Lin describes the Putain environment where a number of legitimate companies operate, like Nike. Lin worked in these legitimate factories and then moved to the illegal sector, he says as a means to support a business until they could move into a legitimate brand manufacturing of their own.
As the corporate worry about fake products has increased the quality behind these counterfeit goods has increased dramatically. “Because of technological advancements in materials and processing techniques, many counterfeit goods have found their way to legitimate bricks-and-mortar retail stores... in developed and developing countries...” (Marcketti 2009) The operations are no longer held in low tech environments but modern well equipped facilities that often match the quality of the real production facilities.
What is emerging is a highly profitable environment that is merging itself into consumer culture in an confusing manner. It is important to understand there are two types of counterfeit products: deceptive and non-deceptive. (Grossman 2010)
Deceptive goods are “those produced and sold with the intent of deception, misrepresenting the origin, and sacrificing the efficacy and safety of the product.” (Nair 2010) Non-deceptive products are consumer goods which reach the market with the buyer knowing, or perceiving, the faux nature of the product but acceptance for a number of reasons. Therefore there are multiple markets targeted with these products all of which result in a variety of economic, societal, psychological, and environmental impacts.
[The Goods]
[Commodity Goods]
Commodity goods are counterfeit items that do not have a direct societal or health purpose. These items include counterfeit apparel, accessories, electronics, etc. “In the last fiscal year (2009), U.S. Customs and Border Protection seized more than $260 million worth of counterfeit goods. The goods included counterfeit snuggies, DVDs, brake pads, computer parts, and baby formula.” (Schmidle 2010) The proliferation of these types of goods usually calls into questions notions of creative license, and copyright violation.
Some major examples of these goods are sneakers which made up 40% of siezed goods in 2009, electronics such as the Apple products which have been released sometimes months before release dates, and a number of golf club cases.
[Drugs + Reliant Goods]
There are a number of counterfeit items though that can be considered critical to health and safety of countries and individuals. The largest worry, which will be discussed at greater length in the impact portions of the discussion, is in the realm of fake drugs. Counterfeit drugs affect all areas now, from “cosmetic” drugs to actual disease fighting antibiotics and prescriptions. Some of these drugs have even found their way into the retail marketplace in more developed countries, although the majority are sent to poor developing countries. “The global pharmaceutical markets have always suffered from a spate of counterfeit products including fake, spurious, substandard and fraudulent preparations which apart from resulting in huge economic losses to the nation, states, and corporations also severely affect the health and well being of populations.” (Nair 2010) Drugs aren't the only worry in this area though as other items such as fake fertilizers and precautionary items, like contraceptives, create new types of fears such as loss of crops, and population control.
Some specific examples were the Nigerian malarial tablet problem, the Kenyan coffee plantation problem, large amounts of Chinese condoms, as well as the baby formula scandal which appears to be an ongoing problem for China.
[Economic Impact]
Counterfeit goods are detrimental to individual businesses and corporations as they destroy the credibility of the brand name. However many of these brands are located within the Western World, while the actual production facilities have been moved to developing countries, primarily China and India. What results is a loss in economic gain, but where the corporations were planning on it in countries like the United States, while businesses grow in these developing areas of the world. Counterfeiters operate by “exploiting legal loopholes” and get away with it due to “inaction on the part of the authorities.” (Union Des Fabricants 2004) This is probably due to the increased economic prosperity that comes from these goods in these parts of the world.
However, most of the money is made by the transportation and smuggling of these goods. “Of course, like coca farmers in Bolivia and opium croppers in Afghanistan, Lin [local employees & managers] doesn't make the big money; that's for the networks running importation and distribution.” (Schmidle 2010)
Another major issue with counterfeit goods is during the purchasing procedure, taxes are not being collected through the illegal sale, meaning that individuals money isn't going towards important aspects of governance. This leads into the next topic because if the government isn't gaining from these transactions, what kind of organizations are.
[Societal Impact]
It has been shown that counterfeiting operations are directly related to organized crime rings that deal in a number of immoral and improper markets. It is often common for these trafficking syndicates to diversify with counterfeit consumer goods because of the current lack of punitive measures. By purchasing counterfeit goods these organizations are being supported and encouraged, and by not creating strict regulation, the health and welfare of global citizens is put in jeopardy. This notion also extends to terrorist networks that have been connected to revenue streams from counterfeiting operations.
Nowhere is this understood more than the growing concerns over counterfeit drugs. “Wordlwide sales of counterfeit medicines could top US $75 Billion this year [2010], a 90% rise in five years, according to an estimate published by the Center for Medicine in the Public Interest in the United States of America.” (BWHO 2010) The majority of the danger comes via online sources. Online purchasing provides an outlet for many consumers who for personal pride reasons or cost reasons move to cheaper and more private sources for purchasing. Often these sources are not legitimate though and provide medications that either lack the required medicinal levels, are over dosed, or are simply composed of fake materials. There is growing danger that some counterfeits are moving into normal retail stores. For example, in Brooklyn, NY a large discovery of “fake Trojan brand condoms, which did not have spermicide as advertised and later failed water leakage tests” (Sulzberger 2010) was set to move into the consumer market before being captured.
Lastly, the health implications of these counterfeit drugs is most dangerous in the developing world. “Developing countries are an obvious target for counterfeiters, because the cost of legitimate drugs may be beyond the reach of much of the population and legal controls are often weak...” (BWHO 2010) The most intense case of illegal drugs affecting large populations is seen in the fight against malaria in Africa. Specifically “Nigeria, which was previously hit by drug counterfeiters. In 2001, an estimated half the drugs in the country—from antiobiotics to antimalarials – were fake.” (Lewis 2009)
[Psychological Impact]
Many studies have been done to attempt to figure out what happens when consumers receive counterfeit goods, both knowingly and unknowingly. When consumers become victims of deceptive goods they are often mentally if not physically harmed by the eventual knowledge. It affects future purchasing decisions drastically by placing a distrust of the regulatory systems in their minds. However of great interest to corporations is why consumers seek counterfeits. “Consumers willingness to pay premiums for copies suggests that they value the prestige associated with the look-alike of a name brand. These premiums compensate importers for bearing the risk of confiscation.” (Grossman 2010) One can expand this argument to include the nature of consumer society where the focus is not on high quality long lasting products but style obsolescence. The counterfeits allow the brand name style for the consumer without spending a great deal of money on an item that doesn't need to be high quality. Quality becomes a component of style, not necessarily a function of the longevity of the item.
[Environmental Impact]
While there are limited direct relationships between the physical environment's detriment and counterfeiting, the majority of the worry comes from the resources and moneys that are flowing through the counterfeit markets. The loss of taxes through legitimate sales prevents much needed funding for environmental concerns. The extreme globalization that occurs with counterfeiting is unsustainable by all the transportation required, especially since often multiple superfluous routes are utilized as a masking device for the original origin of the product.
The direct impact on the environment stems mostly from the places of creation where “employees” are often exposed to industrial practice without any type of unionized protection. It is hard to blame counterfeiting operations for the problem alone as many legitimate companies are exposing the environment to levels of pollutants not allowed domestically. However these operations significantly add to the problem and exist without any sort of regulatory rule set.
“Companies that produce counterfeit goods have been linked to terrorism, the international drug trade, sweatshop conditions and child labour in both domestic and international settings.” (IACC 2009)
[LINKS]
[International Anti-Counterfeiting Coalition]
http://www.iacc.org/about-counterfeiting/the-truth-about-counterfeiting.php
http://www.iacc.org/news-media-resources/link-program.php
http://www.iacc.org/news-media-resources/news-archive/index.php
[Blogs]
http://www.counterfeitchic.com/
http://blog.copyrightalliance.org/2010/04/counterfeiting-and-piracy-undermines-the-incentive-to-create/